Professional Documents
Culture Documents
Potentiality of Rural Market A Case of FMCG Product
Potentiality of Rural Market A Case of FMCG Product
2009
Index
Acknowledgement .. 3 Certificate ..... 4 Introduction to Indian Rural Market ... 5 Market Segmentation of Indian Rural Market ..... 6 a. Rural and Urban Potential 7 5. Fast Moving Consumer Goods ..... 8 6. Top 10 FMCG companies in India ......... 9 7. Rural Market and FMCG Products 10 a. Penetration .. 12 8. What makes Rural Market attractive? 13 9. Rural Consumer Insight .. 13 10. MARK Approach to Rural Marketing .... 14 11. Analysis of FMCG Sector .. 15 12. Why Different Strategies .... 16 13. Opportunities ...... 17 14. Case Study 1 Tata Tea ..... 18 a. Company Profile . 18 b. Products and Brands ... 18 15. 4 Ps of Marketing of TATA TEA . 19 16. Case Study 2 Society Tea 21 a. Company Profile ..... 22 b. Mission Statement ...... 22 17. Health Benefits of Society Tea ... 22 18. 4 Ps of Marketing of Society Tea .. 23 19. Live Examples of Market Capturing .. 25 20. Present Position .. 26 21. Bibliography ... 27
1. 2. 3. 4.
2009
ACKNOWLEDGEMENT
There is always a sense of gratitude which one expresses and offer for the helpful and needy services someone renders during all the phases of life. We really wish to express our gratitude towards all members of JIET (Guna) who has been helpful to me in the completion of this project. I express my heartfelt and profound gratitude to our guide Mr. Sandeep Srivastava, Sr. Lecturer Department of Professional Development, JIET, Guna (M.P.) whose valuable suggestions and cooperation have encouraged me and provided the impetus to get this project off the ground. I also duly acknowledge all the faculty members of Professional Development department for guiding me in the making of this project and for solving my problem at every stage.
Date: 19/11/2009
2009
CERTIFICATE
This is to certify that project entitled Potentiality of Rural Market A Case of FMCG Product submitted by Tanuj Bansal(06307G) student of B-Tech Computer Science Engineering at JIET Guna , in partial fulfillment for award of degree of bachelor of technology, is a bonafide record of work under the supervision of Mr. Sandeep Srivastava, Department Professional Development, Jiet Guna. The matter embodied in this report has not been submitted partially or wholly to any other University or Institute for the award of this or any other degree or diploma.
2009
The rural India has 75 percent of the population living in 5,72,000 villages speaking 33
languages, 1652 dialects and have diverse sub cultures and diverse requirements. More than 80 percent of the rural consumers depend upon agriculture and allied activities for their livelihood. The rural market has been growing steadily since the 1980s and, is now bigger than the urban market for both fast moving consumer goods (53 percent share of the total market) and consumer durables (59 percent). An analysis of the National Samples Survey (NSS) data reveals that 75 percent of the expenditure on manufactured goods is accounted by rural India. Technological developments are taking place in rural areas at a rapid fast rate as is in the urban areas. The disposable income in rural India has increased manifold in the last five years than the urban area. All these paved way for rural marketing.
2009
Rural Rich Consumers: The rural rich consumers can be estimated on the basis of land
owned by them. They occupy major portion of the land (in acres) in their locality. They engage in agriculture and allied activities. They hold important positions in their places. They may be a member of political party or may be having the support of political party. They give employment opportunities in their field for other peoples in their locality. They enjoy huge surplus of disposable income. They mostly use the disposable income for purchasing jewels for their family members. They also deposit consistent portion of their amount in the nationalized banks. Some of the rural rich consumers also invest their money in small-scale businesses, land and buildings and act as moneylenders of their locality. They have television, refrigerator, VCD/VCR/VCD, two-wheeler (prefer to have bike), tractor, and car. Their children are sent to the nearby reputed educational institutions for their studies. They prefer to use all leading brands available in the market.
Rural Consumers above Poverty Line: They are identified as the middle class peoples
residing in rural areas. There are 50 million households that live above the poverty line in rural areas of India. When comparing to the rural rich consumers they own few acres of land. They mostly engage in agriculture and few other allied activities. They have only less disposable income and deposit in local banks. They also invest their disposable surpluses if any in jewels for their daughters' marriage. Most of them have two-wheelers like Bajaj M80 or TVS 50 and only few of them prefer to have bikes (bullets) and use these vehicle for multipurpose. Only few of them have tractors and they send their children to the nearby government educational institutions that charge fewer fees. They prefer to have brands, which gives them value for money spent.
2009
Rural Consumers below Poverty Line: There are 260 million Indians who live below
poverty line and most of them are located in rural areas. They occupy minimum portion of land in their locality. Some of them not even have any land in their locality. They survive their family by working in the farm of rich persons in their locality. They work for daily wages and sometimes they are compensated for their work with food grains. They live in hut or in the farm of rich persons. When they dont have work in their village they migrate to the nearby village for work. They also involve in temporary seasonal business for their survival. They mostly purchase local brands or fake brands for their usage because of its less pricing .
3,768 627,000
An average Indian spends around 40% of his income on groceries and 8% on personal care products. A larger part of the total spending pie along with a large base (in terms of population) makes India one of the largest FMCG markets.
2009
We regularly talk about things like butter, potato chips, toothpastes, razors, household
care products, packaged food and beverages, etc. But do we know under which category these things come? They are called FMCGs. FMCG is an acronym for Fast Moving Consumer Goods, which refer to things that we buy from local supermarkets on daily basis, the things that have high turnover and are relatively cheaper. FMCGs constitute a large part of consumers budget in all countries. The retail sector f or FMCGs in India is in the process of a drastic transformation. The transformation of the retail market is likely to have a long-lasting impact on wholesale trade and the distribution of FMCGs as well. Traditional wholesalers are the most likely losers, because large retailers tend to buy directly from suppliers. The Indian FMCG sector is the fourth largest sector in the economy, with a total market size in excess of US$ 13.1 billion. It has a strong MNC presence and is characterized by a well established distribution network, intense competition between the organized and unorganized segments and low operational cost. Availability of key raw materials, cheaper labor costs and presence across the entire value chain gives India a competitive advantage.
2009
GCMMF (AMUL)
5. Dabur India 6. Asian Paints (India) 7. Cadbury India 8. Britannia Industries 9. Procter & Gamble Hygiene and Health Care 10. Marico Industries
2009
Rural market is getting an importance because of the saturation of the urban market. As
due to the competition in the urban market, the market is more than or as saturated as most of the capacities of the purchasers have been targeted by the marketers. So the marketers are looking for extending their product categories to an unexplored market i.e. the rural market. This has also led to the CSR activities being done by the corporate to help the poor people attain some wealth to spend on their product categories. Here we can think of HLL (now, HUL) initiatives in the rural India. One of such project is the Project Shakti, which is not only helping their company attain some revenue but also helping the poor women of the village to attain some money which is surely going to increase their purchasing power. Also this will increase their brand loyalty as well as recognition in that area. Similarly we can think of the ITC E-Chaupal, which is helping the poor farmers get all the information about the weather as well as the market price of the food grains they are producing. In other view these activities are also helping the companies increase their brand value. So as it is given above the significance of the rural market has increased due to the saturation of the urban market as well as in such conditions the company which will lead the way will be benefited as shown by the success of HUL and ITC initiatives. There was a time when the FMCG companies ignored rural market, they took no any interest to produced or sell products in rural market in India. It was the initial stage of FMCG companies in India. As per as the time has passed, the strategy and marketing style of FMCG companies has changed. In 1970, Nirma was the first FMCG Company to initiate and produce goods according to rural consumers. In the early 1970s, when Nirma washing powder was introduced in the low-income market, Hindustan Lever Limited (HLL) reacted in a way typical of many multinational companies. However, Nirmas entry changed the whole Indian FMCG scene. It became a great success story and laid the roadmap for others to follow. MNCs like HLL, which were sitting pretty till then, woke up to new market realities and noticed the latent rural potential of India. In 1983, C K Ranganathan started selling shampoos in a sachet with an investment of Rs 15,000 and dared to take on the multinationals, Lever and P&G, the unquestioned leaders in that segment. He targeted rural and small-town consumers who used soaps to wash their hair. He introduced the sachet at 90 paise and then reduced it to 50-paise. And thats when the multinationals noticed him. Sales zoomed from 35,000 sachets to 12 lakhs. Initially they took any sachet, but after three months they restricted to Chik sachets.
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2009
Now at the present time, rural market is one of the best opportunity and focusing sector for the major FMCG companies in India. Each and every company is set to invest a huge capital for competition in rural market. According to the Federation of Indian Chambers of Commerce and Industry, the number of rural households using FMCG products has grown from 136 million in 2004 to 143 million in 2007, a clear indication that rural consumers are shifting from commodities to branded products. Urban consumers, on other hand, could go slow on FMCG expenses, thanks for inflation spiral, rise in fuel cost and costlier credit. Evidence suggests that for the first time, the rural market has grown faster than the urban market in key product categories in April-May 2008. Time and again marketing practitioners have waxed eloquent about the potential of the rural market. But when one zeroes in on the companies that focus on the rural market, a mere handful names come to mind. Hindustan Lever Limited (HLL) is top of the mind with their successful rural marketing projects like 'Project Shakti' and 'Operation Bharat'. The lynchpin of HLL's strategy has been to focus on penetrating the market down the line and focusing on price point. Furthermore, activating the brand in the rural market through activities, which are in line with the brand itself, is what sums up HLL's agenda as far as the rural market is concerned informs MindShare Fulcrum general manager R Gowthaman. Amul is another case in point of aggressive rural marketing. Some of the other co rporate that are slowly making headway in this area are Coca Cola India, Colgate, Eveready Batteries, LG Electronics, Philips, BSNL, Life Insurance Corporation, Cavin Kare, Britannia and Hero Honda to name a few. We can safely say that until some years ago, the rural market was being given a stepmotherly treatment by many companies and advertising to rural consumers was usually a hit and miss affair. More often than not, the agenda being to take a short-cut route by pushing urban communication to the rural market by merely transliterating the ad copy. Hence advertising that is rooted in urban sensitivities didn't touch the hearts and minds of the rural consumer. While, this is definitely changing, the process is slow. The greatest challenge for advertisers and marketers continues to be in finding the right mix that will have a pan-Indian rural appeal. Coca Cola, with their Aamir Khan Ad campaign succeeded in providing just that. Coca-Cola India tapped the rural market in a big way when it introduced bottles priced at Rs 5 and backed it with the Aamir Khan ads. The company, on its behalf, has also been investing steadily to build their infrastructure to meet the growing needs of the rural market, which reiterates the fact that this multinational has realized the potential of the rural market is going strength to strength to tap the same. So the fact remains that the rural market in India has great potential, which is just waiting to be tapped. Progress has been made in this area by some, but there seems to be a long way for marketers to go in order to derive and reap maximum benefits. Moreover, rural India is not so poor as it used to be a decade or so back. Things are sure a changing!
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2009
Low penetration and low per capita consumption: Due to the large size of the
market, penetration level in most product categories like jams, toothpaste, skin care, hair wash etc. in India is low. This is more visible when comparison is done between the rural and the urban areas. The average consumption by rural households is much lower than their urban counterparts. Existence of unsaturated markets provides an excellent opportunity for the industry players in the form of a vastly untapped market as the income rises.
Penetration %
Category Deodorants Toothpaste Skin Cream Shampoo Utensil Cleaner Instant Coffee All India % Urban % Rural % 2.1 48.6 22 38 28 6.6 5.5 74.9 31.5 52.1 59.9 15.5 90.7 91.4 97.4 0.6 37.6 17.8 31.9 14.6 2.8 84.1 87.4 88.9
As per given in the above chart, rural market shows a good improvement. In the presence of some product categories like, toilet soap, detergent bar, washing powder etc., it is same as in the urban level. Rural market is also improving in the other products category.
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2009
Rural market has following arrived and the following facts substantiate this:
742 million people Estimated annual size of the rural market FMCG Rs 65,000 Crore Durables Rs 5,000 Crore Agri-inputs (incl. tractors) Rs 45,000 Crore 2 / 4 wheelers Rs 8,000 Crore In 2001-02, LIC sold 55 % of its policies in rural India. Of two million BSNL mobile connections, 50% in small towns/villages Of the six lakh villages, 5.22 lakh have a Village Public Telephone (VPT) 41 million Kisan Credit Cards issued (against 22 million credit-plus-debit cards in urban) with cumulative credit of Rs 977 billion resulting in tremendous liquidity. Of 20 million Rediffmail signups, 60 % are from small towns. 50% transactions from these towns on Rediff online shopping site 42 million rural HHs availing banking services in comparison to 27 million urban HHs. Investment in formal savings instruments: 6.6 million HHs in rural and 6.7 million in urban
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2009
Rural India has problems quite unique in nature. The major error people make while
marketing to the rural market is that they apply the same theories as learned from the urban context. The underlying myth among the marketers that the rural consumer is similar to an urban consumer except for the constraint of money has been proved wrong. It is in this regard that we have identified MARK (Money, Acceptability, Reach and Knowledge) as the major challenges faced by a rural marketer. Each of these factors has been discussed in detail. Money: Products need to be within the affordable range. Sachetisation (selling in sachets) was used to overcome this barrier and thereby sell to the rural consumer. This strategy backfired and was found that sachets have in fact cannibalized the sales of the larger volume packaged products manufactured by the same company. Acceptability: There is a need to offer products that suit the rural market. Customizing products to suit the needs of the rural folk will help it gain wider acceptability and thereby lead to increased penetration within these rural markets. E.g. A rural consumer will never be willing to accept Kelloggs cornflakes as a substitute to his breakfast of Paratha and curd but if the Kelloggs is able to communicate the message that Kelloggs since it is full of nutrients vital to a growing child the can be used to supplement his childs daily meal then he would be ready to buy Kelloggs for his child.
Reach: The first step towards gaining sales within the rural space is to see to it that the
reach of the product be wide enough. Unless the product is available there is no point whether we overcome the other challenges or not as we will not finally derive any sales at all. Marketers must trade off the distribution cost with incremental market penetration. Over the years, MNCs have tried out various tactics to reach out to the rural markets from using auto rickshaws, bullock-carts and even boats in the backwaters of Kerala. Over the years the hub and spoke distribution model has evolved as the one most suited to reach out to the rural villages.
Knowledge : Knowledge or awareness about the product depends on how effective market
communication is. It is extremely important to choose the right channel for market communication. It is a commonly held misconception by marketers and ad-agencies that TV is the best medium to communicate to these rural masses. TV reaches 36% only and there is a substantial media dark area of 2405 million in Bihar, Orissa, East UP, MP and Rajasthan. Another important factor from the rural point of view is that during sowing and harvest time there is electricity for agriculture but no time to watch TV, after the harvest when farmers are free, electricity otherwise given to them is now diverted to the industry.
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2009
Weaknesses:
1. Lower scope of investing in technology and achieving economies of scale, especially in small sectors 2. Low exports levels 3. "Me-too" products, which illegally mimic the labels of the established brands, narrow the scope of FMCG products in rural and semi-urban market.
Opportunities:
1. Untapped rural market 2. Rising income levels i.e. increase in purchasing power of consumers 3. Large domestic market - a population of over one billion 4. Export potential 5. High consumer goods spending
Threats:
1. Removal of import restrictions resulting in replacing of domestic brands 2. Slowdown in rural demand 3. Tax and regulatory structure
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2009
Rural markets, as part of any economy, have untapped potential. There are several
difficulties confronting the effort to fully explore rural markets. The concept of rural markets in India is still in evolving shape, and the sector poses a variety of challenges. Distribution costs and non availability of retail outlets are major problems faced by the marketers. The success of a brand in the Indian rural market is as unpredictable as rain. Many brands, which should have been successful, have failed miserably. This is because, most firms try to extend marketing plans that they use in urban areas to the rural markets. The unique consumption patterns, tastes, and needs of the rural consumers should be analyzed at the product planning stage so that they match the needs of the rural people. Therefore, marketers need to understand the social dynamics and attitude variations within each village though nationally it follows a consistent pattern. The main problems in rural marketing are: Understanding the rural consumer Poor infrastructure Physical Distribution Channel Management Promotion and Marketing Communication Dynamics of rural markets differ from other market types, and similarly rural marketing strategies are also significantly different from the marketing strategies aimed at an urban or industrial consumer.
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2009
Opportunities
In 50 years only 40% villages connected by road, in next 10 years another 30% More than 90% villages electrified, though only 44% rural homes have electric connections Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is connected by STD Social Indicators have improved a lot between 1981 and 2001 Number of pucca houses doubled from 22% to 41% and kuccha houses halved (41% to 23%) Percentage of BPL(Below Poverty Line) families declined from 46% to 27% Rural Literacy level improved from 36% to 59% Low penetration rates in rural so there are many marketing opportunities Durables Urban Rural Total (% of rural HH) CTV 30.4 4.8 12.1 Refrigerator 33.5 3.5 12.0 FMCGs Shampoo 66.3 35.2 44.2 Toothpaste 82.2 44.9 55.6 Marketers can make effective use of the large available infrastructure Post offices 1,38,000 Haats (periodic markets) 42,000 Melas (exhibitions) 25,000 Mandis (agri markets) 7,000 Public distribution shops 3,80,000 Bank branches 32,000 Proliferation of large format rural retail stores which have also been successful DSCL Haryali stores M & M Shubh Labh stores TATA/Rallis Kisan Kendras Escorts rural stores Warnabazaar, Maharashtra (annual sale Rs 40 crore)
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2009
CASE STUDY - 1
Company Profile
Set up in 1964 as a joint venture with UK-based James Finlay and Company to develop value-added tea, the Tata Tea Group of Companies, which includes Tata Tea and the UKbased Tetley Group, today represent the world's second largest global branded tea operation with product and brand presence in 40 countries. Among India's first multinational companies, the operations of Tata Tea and its subsidiaries focus on branded product offerings in tea but with a significant presence in plantation activity in India and Sri Lanka. The consolidated worldwide branded tea business of the Tata Tea Group contributes to around 86 per cent of its consolidated turnover with the remaining 14 per cent coming from Bulk Tea, Coffee, and Investment Income. The Company is headquartered in Kolkata and owns 27 tea estates in the states of Assam and West Bengal in eastern India, and Kerala in the south.
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2009
Instant Tea Instant Tea Division caters to customer specific product and is used for light density 100% Teas, Iced Tea Mixes and in the preparation of Ready to Drink (RTD) beverages. Instant Tea powder is packed in bulk packages of 20/25/35 kg each.
Intant tea powder - heavy density Instant tea powder - institutional density Instant tea powder - grocery density Micro milled instant tea powder
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2009
Price:
Marketers need to understand the psyche of the rural consumers and then act accordingly. Rural marketing involves more intensive personal selling efforts compared to urban marketing. Firms should refrain from designing goods for the urban markets and subsequently pushing them in the rural areas. To effectively tap the rural market a brand must associate it with the same things the rural folks do. This can be done by utilizing the various rural folk media to reach them in their own language and in large numbers so that the brand can be associated with the myriad rituals, celebrations, festivals, melas and other activities where they assemble. All the prices of the products depend upon the package i.e., 50gms or 100gms. Normally a Penetrating Strategy is used frequently.
Promotion:
Firms must be very careful in choosing the vehicle to be used for communication. Only 16% of the rural population has access to a vernacular newspaper. So, the audio visuals must be planned to convey a right message to the rural folk. The rich, traditional media forms like folk dances, puppet shows, etc with which the rural consumers are familiar and comfortable, can be used for high impact product campaigns.
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2009
CASE STUDY 2
SOCIETY TEA
"Time for you and time for me, And time yet for a hundred in decisions, And for a hundred visions and revisions, Before the taking of a cup of tea"
An Aromatic Story
It's happening slowly, surely and smoothly. People of the world are now waking up To the pleasures of SOCIETY TEA It comes from the people who have been giving the World some of the finest blends of tea, since 1933 - Hasmukhrai & Co. The Company launched Society Tea to meet the ever- increasing demands from distant shores such as yours. Wherever tea is a tradition, Society Tea Is always welcome, because here is a blend Of such fine flavor, freshness and consistency, That meets your expectations. It's everything your cup of tea should be.
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2009
Company Profile
Tea is a tradition in our country. As, no doubt, it is in yours as well. But slowly, surely, people all over are being a little more conscious about the tea that they drink. Slowly but surely, tea is being referred to as SOCIETY TEA. Surely, one more delightful indication of the world growing smaller. And in a way, of people coming closer. Now let's raise our cups, to this cheerful tradition and to our little world of big-tasting teas.
Mission Statement
The objective is to create new blends for the world. Teas of a superlative quality that taste buds had never known To extend its reach, cross geographical and cultural boundaries and reaching the hearts of the people.
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2009
SOCIETY TEA
Available in 250, 500 grams and 1 Kg. only SOCIETY TEA - PET
JAR
SOCIETY PREMIUM
T - TOWN TEA
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2009
The Pricing strategy used by Society Tea is somewhere in between penetrating and skimming, but the major part is occupied by Penetrating. Prices of Tea are as per the product packages. E.g., - 100 gms are @ Rs.20/-
Promotion:
They arrested the eyes. There was something different about them. Something fresh. Something elegant. Little wonder then, that tea-lovers felt persuaded to pick them up and take them home. Yes, we're talking about the package. As a matter of fact, everything was designed to appeal to the senses. From the packaging to the point-of-sales of attractions, from the press advertisements to the posters, from radio jingles to TV commercials. The jingle "Tea. Tea. Tea." caught on so much that people we heard humming it, while walking into stores, waiting for trains, watching a cricket-match or generally to ease out their boredom. Even children were heard singing it. One felt freshness, newness, a sense of contentment similar to the feeling one gets after each sip of Hasmukhrai & Co.'s teas. You couldn't expect any less from them. After all, they take so much trouble to create such exquisite blends of tea. Each of these pieces of communication was an invitation in every sense of the word. In fact, the first ad for SOCIETY Tea said "Welcome to the Society It was an invitation well accepted, for the society of tea lovers is growing larger, day by day. We're tempted to say Tea cheers for the design."
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2009
One very fine example can be quoted of Escorts where they focused on deeper
penetration. They did not rely on T.V or press advertisements rather concentrated on focused approach depending on geographical and market parameters like fares, melas etc. Looking at the kuchha roads of village they positioned their bike as tough vehicle. Their advertisements showed Dharmendra riding Escort with the punch line Jandar Sawari, Shandar Sawari. Thus, they achieved whopping sales of 95000 vehicles annually.
HLL started Operation Bharat to tap the rural markets. Under this operation it passed
out lowpriced sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream to twenty million households.
ITC is setting up e-Choupals which offers the farmers all the information, products and
services they need to enhance farm productivity, improve farm-gate price realization and cut transaction costs. Farmers can access latest local and global information on weather, scientific farming practices as well as market prices at the village itself through this web portal - all in Hindi. It also facilitates supply of high quality farm inputs as well as purchase of commodities at their doorstep.
BPCL Introduced Rural Marketing Vehicle (RMV) as their strategy for rural marketing. It
moves from village to village and fills cylinders on the spot for the rural customers. BPCL considered low-income of rural population and therefore introduced a smaller size cylinder to reduce both the initial deposit cost as well as the recurring refill cost.
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2009
Present Position
Rural markets, as part of any economy, have untapped potential. There are several
difficulties confronting the effort to fully explore rural markets. The concept of rural markets in India, as also in several other countries, like China, is still in evolving shape, and the sector poses a variety of challenges, including understanding the dynamics of the rural markets and strategies to supply and satisfy the rural consumers. Thus looking at the challenges and the opportunities which rural markets offer to the marketers it can be said that the future is very promising for those who can understand the dynamics of rural markets and exploit them to their best advantage. A radical change in attitudes of marketers towards the vibrant and burgeoning rural markets is called for, so they can successfully impress on the 230 million rural consumers spread over approximately six hundred thousand villages in rural India.
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2009
Bibliography
Following are the sources which were referred while completing this project :
1. 2. 3. 4. 5. 6. 7. 8. 9. http://en.wikipedia.org/wiki/Rural_markets http://www.naukrihub.com/india/fmcg/overview/ http://insightory.com/view/175/rural_marketing_in_india http://www.oppapers.com/essays/Fmcg-Sector-India/176985 http://www.oppapers.com/essays/Research-Paper-On-Marketing-To-Rural/229881 http://www.oppapers.com/essays/Lifebuoy/192117 http://publicrelationmanagement.blogspot.com/2009/01/wasss-up.html http://www.indianmba.com/Faculty_Column/FC448/fc448.html http://www.oppapers.com/essays/Conterfrid-Brands/188985
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